Blurring the line between social and economic imperative – an optimistic revaluation of social leadership in a crisis

Photo by Evgeni Tcherkassi on Unsplash

This blog post is provided by Peter Gollowitsch, a student in the Master program Leading Innovative Organizations at the Johannes Kepler University Linz. Peter is (co-)founder of several start-ups and also Director Consulting and Concept at netural.  

Normally an organization’s environment changes at variable, but reasonably foreseeable levels. It is a leadership task to continuously monitor and control the effects those changes might have on the organization. Sometimes the amplitude of this “frequency of change” is higher, leading to a higher degree of management attention. As soon as management has adopted the organization to the consequences of such a change (or the threat luckily has passed by), management attention for environmental variables goes back to a normal level. To the contrary, if the threat cannot easily be averted and is “beyond the scope of everyday business and … threatens the operation, safety and reputation of an organization”, management attention increases further and switches crisis-response-mode to “mitigate such a critical situation as soon as possible in order to reduce to the minimum the negative effect of the crisis.” (Pedraza, 2010)

In our current crisis situation, threat is continuous (Muñoz et.al., 2019) and the predictability and influenceability of the consequences are at an unprecedented low level (Gundel, 2005). The “frequency of change” in our environment is at a permanent peak – but which organization can stand a permanent crisis-mode? And how can leaders tackle the enduring high level of uncertainty that comes with this crisis on a social and economic level?

“I flag the (ir)relevance of most leadership theories to the challenges that lie ahead, and suggest that the coronavirus crisis again shows the need for our scholarship to be more relevant, address big issues and become less introspective”, states Tourish (2020) in the introduction to the recent special issue “Why the coronavirus crisis is also a crisis of leadership” published in the journal Leadership.Tourish argues that mainstream leadership theories are of little help in guiding leaders through such crisis situation, because they tend to assume that leaders have sufficient information, expertise and resources to guide their followers through a crisis. Yet, as also argued in lecture 5, leaders in the current crisis need to “cope with radical uncertainty and make decisions where the margin of error is high and the consequences of failure potentially catastrophic” (p. 265). Going through several examples of populist leaders in the coronavirus crisis that are also discussed in other articles in the special issue, he comes to the conclusion that “Undaunted, populist leaders exploit uncertainty to suggest that simple solutions will work. I suggest that the responses of such leaders have been characterized by incompetent leadership, denialist leadership, panic leadership, othering leadership and authoritarian leadership”.

Tourish argues, however, that the coronavirus crisis might be an opportunity for rethinking leadership theory and practice – particularly with regard to the underlying theory of the firm which is oriented towards shareholders (rather than stakeholders) and the underlying assumption that a concentration of power and surveillance would be decisive, particularly in times of crisis.

What can be expected from leaders in such a complex situation is a very present topic in research and media these days. For example, the question around the scarcity of masks and whether preparedness was appropriate or not is prominent in public debates, questioning the leadership of governmental actors. But also hundreds of thousands of entrepreneurs worldwide face a crisis of leadership, because they have to tackle the dual demands of economic survival and social responsibility. If they take the latter seriously, their burden at first sight doubles up. But if they don’t, they might stumble in the long run.

There are numerous positive examples in the context of this crisis – in both, public and business leadership – that demonstrate in an admirable way how successful leadership in a crisis is driven not only by economic motivators. In what follows, I will draw on some of these examples to develop ideas on what the future of leadership might look like, particularly with regard to the tension between economic and social imperatives.

In the corporate sphere, Microsoft is being cited by Tourish as an example where hourly workers on the companies campus have been fully paid over weeks although their workload had massively reduced due to most of the employees working from home.

New Zealand responded to the COVID 19 crisis with a multi-phase plan that was guided by the best scientific health advice available to the government. While there was a certain level of preparedness based on pre-existing influenza-plans, one of the key factors to tackle the crisis so well here was the communicative grounding (Cornelissen et.al., 2014) laid by the empathic leadership style of New Zealand’s prime minister Jacinda Ardern who was led by respect for science, facts and evidence (Wilson, 2020).

To my estimation, comparatively little focus these days lies on how SME’s tackle this crisis (as approached for example by Herbane, B. 2010), as well as independent professionals or even hourly workers (e.g. in private households). Some personal observations (from Austria) between March and June of this year exemplify that empathic and social acting in an economic context might serve as a valid strategy in crisis-management.

Similar to the Microsoft example, there were entrepreneurs paying their employees the delta between public pay for short-time work and the net income. Likewise, families paid their cleaning ladies or nannies although those couldn’t come for weeks. In both cases, the benefit for the employees was evident. Motivation and confidence of workers was strengthened and commitment to the employer grew in the still difficult time after the phase of social-distancing.

Some entrepreneurs engaged in remote social activities and organized meetups for non-commercial topics that helped employees last through lockdown phase such as listening to each other’s travel reports, exchanging valuable information on local shops that would do home delivery or supporting kids with home schooling and education during lockdown phase. This extra effort had to be organized and communicated at a time when the impact on the organization was just unfolding its full economic threat for a company. But ultimately, these measures helped to increase the resilience of the whole organization in a phase where uncertainty in societs was at its maximum: The demand for informal social contacts, that normally happened in breaks and chats in the office, could be remotely fulfilled in those special interest channels. Informal communication was actively kept alive between colleagues and actual worries and fears could be exchanged and discussed. Such the cohesion of the members of the organization was preserved and individual uncertainty could be lowered.

One entrepreneur – a renowned hairdresser with over 20 employees  – refused to dismiss any employee although he was prohibited to open his business by law during lockdown for almost three months. In the first four weeks after opening his shop again he almost totally caught up his revenue loss from the lockdown as he was able to put his motivated (and thankful) team to work at full capacity.

Another example from a SME: the company paid employees – that otherwise would have been sent to short-time work – to exclusively work on a project for an access control software in public spaces during COVID-19. Like many others the company had actualized opportunities that had occurred through the massive change in the environment. Only four weeks after lockdown they rolled out the product successfully to all hospitals in upper Austria. Other colleagues experienced sensemaking by the success story and started to think how to sell the product to other clients.

My suggestion would be to further investigate those numerous “small business cases” in the context of crisis management, as valuable patterns might be recognized that contribute to leadership theory on its way through and beyond the COVID-19 crisis.

„What leaders need during a crisis is not a predefined response plan but behaviors and mindsets that will prevent them from overreacting to yesterday’s developments and help them look ahead“ (D’Auria & De Smet, 2020)

Summing up, I would emphasize, in line with the above quotation: especially during a fundamental global crisis, capacity building on an individual leader’s and organizational level is more “key” to tackle such extraordinary challenges than discussing preparedness on a procedural level. This argument also builds on the observation of Berthod et. al. (2016) – Class 4 – that procedures are less viable in a crisis representing an “extraordinary incident” (i.e. little predictability) than a “routine incident”, as well as on the literature of lecture 2 where it is argued that organizational bricolage and the building of socio-cognitive resources foster an organizations resilience to unexpected incidents (Bechky et. al., 2011). Similarly, Gundel (2005) states that in complex crises (i.e. with a mixed character such as global warming or COVID-19 pandemic), formal classifications of incidents (which are a prerequisite for standard procedures) are subject to change due to their low predictability.

Such, as a notorious optimist, I support Tourish’s idea that a new notion of leadership might arise out of the present crisis – particularly one that will blur the lines between social and economic imperatives in leadership theory and practice.

Thanks to Elke Schüßler for feedback and support.

This text is mainly inspired by:

Tourish, D. 2020. Introduction to the special issue: Why the coronavirus crisis is also a crisis of leadership. Leadership, 16(3): 261–272.

It further draws on:

Bechky, B. A., & Okhuysen, G. A. (2011). Expecting the unexpected? How swat officers and film crews handle surprises. Academy of Management Journal, 54(2), 239–261.

Berthod, O., Grothe-Hammer, M., Müller-Seitz, G., Raab, J., & Sydow, J. (2016). From high-reliability organizations to high-reliability networks: The dynamics of network governance in the face of emergency. Journal of Public Administration Research and Theory, muw050.

Cornelissen, J. P., Mantere, S., & Vaara, E. 2014. The contraction of meaning: The combined effect of communication, emotions, and materiality on sensemaking in the stockwell shooting: the contraction of meaning. Journal of Management Studies, 51(5): 699–736.

D‘Auria, De Smet, 2020. Leadership in a crisis: Responding to the coronavirus outbreak and future challenges, McKinsey, http://www.mckinsey.com/business-functions/organization/our-insights/leadership-in-a-crisis-responding-to-the-coronavirus-outbreak-and-future-challenges

Gundel, S. 2005. Towards a new typology of crises. Journal of Contingencies and Crisis Management, 13(3): 106–115.

Herbane, B. 2010. Small business research: Time for a crisis-based view. I​nternational Small Business Journal: Researching Entrepreneurship​, 28(1): 43–64.

Muñoz, P., Kimmitt, J., Kibler, E., & Farny, S. 2019. Living on the slopes: Entrepreneurial preparedness in a context under continuous threat. Entrepreneurship & Regional Development, 31(5–6): 413–434.

Pedraza J., 2010. Elements for effective management of a business corporation crisis situation in P. Alvintzi et. al., Crisis Management. Nova Science Publishers pp. 1-46.

Wilson, S. 2020. Pandemic leadership: Lessons from New Zealand’s approach to COVID-19. Leadership, 16(3): 279–293.

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